There was one driver change heading into the race. Having been in one of the two Benetton cars since the seventh race of the season at Canada, Alexander Wurz stood down from his role as race driver and was replaced by Gerhard Berger. Berger was forced to miss the previous three rounds due to a reoccurring sinus problem, requiring two operations.[4]

On 22 July, four days before the event's first free practice sessions took place, Benetton confirmed the team would sign Fisichella for 1998, while the organisers of the German Grand Prix signed a deal with the Fédération Internationale de l'Automobile (FIA), to continue hosting the race until 2001.[5]

Four practice sessions were held before the Sunday race—two on Friday, and two on Saturday. The Friday morning and afternoon sessions each lasted an hour. The third and final practice sessions were held on Saturday morning and lasted 45 minutes.[6] The two practice sessions were affected by occasionally damp and wet conditions, which made the track moderately slipperly. Ralf Schumacher set the session's fastest time, with a lap of 1:46.196, one-tenth of a second quicker than Michael Schumacher.[7]

Saturday's afternoon qualifying session lasted for an hour. Each driver was limited to twelve laps, with the grid order decided by the drivers' fastest laps. During this session, the 107% rule was in effect, which necessitated each driver set a time within 107% of the quickest lap to qualify for the race.[6] Berger clinched the twelfth pole position of his career, and the first for the Benetton team since the 1995 Japanese Grand Prix with a time of 1:41.873. He said his lap time was "more or less" capable of what he could achieve and almost lost control of his Benetton on his final timed run before he spun at Sachs Kurve. Berger was joined on the front row of the grid by Fisichella who recorded a lap 0.023 seconds slower than Berger and felt he could have taken pole-position as he slid at Opel corner. Häkkinen qualified third and was satisfied with his performance; he was quicker than Berger in the first sector of the track but drove on at the Senna chicane and was delayed by Berger's spin. Michael Schumacher took fourth and experimented with a higher downforce set-up during the session. He was ahead of Frentzen in the faster of the two Williams and was afflicted with poor grip and balance. Alesi took sixth having spun his car in the final minute of the session. Ralf Schumacher braked late for the Ost chicane on his first timed run, and lost four-tenths of a second in the track's infield section during his next run and secured seventh overall. Coulthard managed eighth and spun off into the gravel trap at the turn 15 right-hand corner towards the end of the session. Villeneuve was afflicted with a 3 kilometres per hour (1.9 mph) straight-line speed deficit in his race car and switched to the spare Williams set up for Frentzen which was harder to handle and he was restricted to ninth. Irvine completed the top ten and reported his car ran badly over the kerbs lining the track but was confident he would have a more competitive Grand Prix.[8][9]

The drivers took to the track at 09:30 CEST (UTC+1) for a 30-minute warm-up session.

Giancarlo Fisichella took his first ever front-row start, and was challenging Berger for the win until he punctured a tyre on the debris of Rubens Barrichello's blown engine. This same incident had helped him gain the lead, as the smoke from the engine delayed Berger prior to his pit stop. Fisichella only led for two laps before Berger repassed him. After Fisichella broke down due to damage from the flailing tyre (caused while he tried to drive back to the pits), Michael Schumacher gave him a lift back to the pits after the race.

Berger's last win would also be the last for Benetton, just as Berger's first win had been the team's first. It was also Benetton's only win as an Italian constructor. As of 2017, this is also the last race won by an Austrian driver.

^ abDomenjoz, Luc (1997). Formula 1 Yearbook - 1997-98 (8th ed.). Parragon. p. 220. ISBN0-7525-2386-4. 119. Free practice will take place:a) two days (Monaco : three days) before the race from 11.00 to 12.00 and from 13.00 to 14.00.b) the day before the race from 09.00 to 09.45 and from 10.15 to 11.00